International Journal of Trend in Scientific Research and Development (IJTSRD)

Volume 6 Issue 6, September-October 2022 Available Online: www.ijtsrd.com e-ISSN: 2456 – 6470

Effect of Financial Innovation on the

Performance of Deposit Money Banks in Nigeria
Chigozie Camillus Ibe1, Dr. Chinedu Blessing-Mike Obialor2
1
Department of Banking and Finance, Faculty of Management Sciences,
Chukwuemeka Odumegwu Ojukwu University, Ighariam, Anambra State, Nigeria
2
Department of Banking and Finance, Faculty of Management Sciences,
Legacy University Okija Anambra State, Nigeria

ABSTRACT How to cite this paper: Chigozie

This study centres on financial innovation and performance of Camillus Ibe | Dr. Chinedu Blessing-
deposit money banks in Nigeria. The main objective is to ascertain Mike Obialor "Effect of Financial
the effect of financial innovation on the performance of deposit Innovation on the Performance of
money banks in Nigeria. The specific objectives are to evaluate the Deposit Money Banks in Nigeria"
Published in
effect of automated teller machine, point of sale, web internet transfer
International Journal
and mobility of payment on the performance of deposit money banks of Trend in
in Nigeria proxied by the value of commercial bank deposits in Scientific Research
Nigeria. The data employed were secondary data obtained from the and Development
Central Bank of Nigeria Statistical Bulletin for the period 2009-2020. (ijtsrd), ISSN: 2456-
This study employed ordinary least square (OLS) method of 6470, Volume-6 | IJTSRD52040
estimation to establish the effect of the independent variables on the Issue-6, October
dependent variable. The (OLS) is the most efficient method because 2022, pp.1241-1251, URL:
of the ’’Best Linear Unbiased Estimator’’ (BLUE) properties. The www.ijtsrd.com/papers/ijtsrd52040.pdf
analysis revealed that point of sale, payment mobility, automated
teller machine and web internet had positive effect on the Copyright © 2022 by author (s) and
International Journal of Trend in
performance of deposit money banks in Nigeria for the period under
Scientific Research and Development
study. This depicts that financial innovation helps in increasing Journal. This is an
profitability and return on assets of deposit money banks in Nigeria. Open Access article
Therefore, the study recommends among others that the government distributed under the
should put in place proper monetary and fiscal policies in order to terms of the Creative Commons
promote financial innovations in Nigeria as the investigations in this Attribution License (CC BY 4.0)
study have proved to engender performance of deposit money banks (http://creativecommons.org/licenses/by/4.0)
in Nigeria.

INTRODUCTION
The Nigerian financial sector has experienced pricing of new instruments and facilitates the
tremendous dynamism over time. A great deal of identification, measurement, and monitoring of risks
changes have been embraced in the area that have in portfolios containing complex instruments.
prompted expansion of money related transactions, Innovation research has shown that the increase in
exercises and hierarchical structures that have countries’ innovation performance plays a key role in
enhanced and expanded the productivity of the economic and social development, prosperity, and
monetary framework. Advances in innovation and development. Financial innovation is the most
changing financial conditions have necessitated this important driving force for the transition to the
change. Gorton and Metrick (2019) outline reasons information economy. Liberalized domestic
for growth in modern financial innovation and list regulations, escalated global competition, increase
them as; reduction in insolvency costs, imposed innovations in the new financial methods, and the
points of interest, diminishment in mortal danger, volatile expansion in internet banking, and
decreased administrative costs, straightforwardness information technology accounted for the change in
and customization. Financial innovation offers financial service delivery. Financial innovations have
cheaper and accessible services to financial system greatly impacted the financial market in relation to
and it increases value of service and products in the the establishment of new and big opportunities for the
long run. Technology contributes to the design and shareholders, thus developing new products and

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services to improve new markets. In Africa, the Moreover, Financial Innovation is stirred by
technology-based applications such as mobile excessive competition among banks, overly risky
banking, internet banking, and Automated Teller loans and the stock market crash that caused the
Machine (ATM), Point of Sale Purchase (POS), and default on many bank loans. Performance of
App store provides clients of financial institutions commercial banks has been influenced by some of the
imperative edge in the conveyance of subsisting forces which include mainly innovations adoption.
products. These innovations are accessible to every Goh (2011) observed that there are a number of
Nigerian financial institution's products and services things affecting innovation in developing nations like
with low-cost banking works for 24 hours to 7 days. Nigeria. Lack of enough licensed innovation rights
The introduction of technology-based applications assurance (intellectual property rights) frequently
has greatly impacted the Nigeria financial sectors cause impediments for banks to get engaged with
positively. It has caused financial institutions to be advancements and improvements through innovative
effective and transparent in rendering services. research and development, as the monetary turn offs
Financial institution can just gauge their services by related with their development endeavors diminish
checking how well a firm is making profit for the rapidly once made accessible to the general
proprietors. Such estimation incorporates; benefit population. The banking industry in Nigeria has gone
after expense, return on Assets (ROA), return on through phenomenal growth over the years and the
Equity (ROE), profit per share and any market value same is notable as innovations in banking and
apportionment that is by and large acknowledged. financial sectors, these include; the emergence of
The financial performance of banks and other Point of Sale (POS), Automated Teller Machine
monetary organizations for the most part has been (ATM), Mobility of Payment (MOP), Retail Banking,
measured using a blend of monetary ratio analysis, free warning administrations, usage of standing
benchmarking, and measuring performance against directions of clients, installments of service charges,
spending plan or a blend of these techniques (Ahmad, web keeping money, phone managing an account,
Raza, Amjad, & Akram 2011). portable saving money, and numerous value added
activities (CBN report, 2013). The introduction of
Banking sector changed dramatically although the
Information and communication technology (ICT)
traditional functions as performed by the banks
has largely affected the financial sector both
remained unchanged where there are significant
negatively and positively. Aladwani (2011) observed
increases in the alternative channels owned by the
that the greatest challenges and issues experienced in
bank for delivery of financial services (Wachira,
the financial institutions include; internet security and
2013). According to Sweeny and Morrison (2004),
customer related issues. This brings about the
delivery of services and retail banking has been
importance of managing the costs and risks associated
greatly changed by the innovations in the banking
with financial innovation. Walker (2014) conducted
industry. are some Financial innovations associated
comparative research in regard to the effects of issue
with internet banking , use of ATMs, agency banking,
of innovations as a whole and specifically the firm’s
debit cards and global banking industry which are
performance in USA and indicated that particular
overwhelmingly in the fast pace in the banking sector.
item for consumption improvements is positively
Furthermore, as Otoo (2013) asserts, the banks have
associated with the firm’s growth. Aduda and Kingoo
been able to take some necessary decisions which
(2012), investigated the affiliation linking-banking
support financial innovations due to the stiff
and performance of Nigerian financial structure and
competition in the banking sector. According to
found out that there has been an existence of a good
European Commercial Bank (ECB, 2003), financial
financial rapport between electronic banking and
innovation is described as a factor which leads to cost
organization’s in the Nigerian financial industry.
reduction in a product and the organizations are
Makini (2010) studied the interactions between
mainly banks and other service sectors. Improved
financial innovation and financial performance of
banking performance, market share, better customer
commercial banks in Nigeria and found that financial
response and wide range of products are some of the
innovations improved the operations, liquidity and
benefits associated with financial innovation which
asset quality of the commercial banks. Furthermore,
contribute greatly to profitability.
Kihumba (2008) studied the determinants of financial
Statement of the Problem innovations and their effects on banks performance in
Financial innovation strategies in deposit money Nigerian. The result showed financial innovation as a
banks over the years have faced numerous challenges significant plan. The center of these mixed
amongst which are, slow infrastructural development, conclusions created, brought out the importance of
lack of technical know-how, poverty and insecurity. undertaking a study from a Nigerian perspective to

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 International Journal of Trend in Scientific Research and Development @ www.ijtsrd.com eISSN: 2456-6470
ascertain the influence of financial innovations on Ngugi (2014) noted that financial innovation can be
performance of commercial banks. defined as an act of creating and then popularizing
new financial instruments as well as new
Objectives of the Study
technologies, institutions and markets. For developed
The broad objective of the study is to examine the
economies, it entails institutional, products and
effect of financial innovation on the performance of
processes. Developing economies like Nigeria have
deposit money banks (proxied by the value of
however achieved financial innovation more in the
commercial bank deposits) in Nigeria. The specific
area of processes or new ways of doing financial
objectives are to;
businesses like online banking, Automated teller
1. Evaluate the effect of automated teller machine
machines, point of sale etc. This study therefore
on the value of commercial bank deposits in
concentrates more on financial innovation from the
Nigeria.
process angle; Process innovation is new ways of
2. Analyze the effect of point of sale on the value of
operating business and implementing information
commercial bank deposits in Nigeria
technology, such as the Automated Teller Machine
3. Investigate the effect of web internet transfer on
(ATM), mobile banking, and online banking, among
the performance of deposit money banks in
others.
Nigeria
4. 4 Determine the effect of mobility of payment on Financial performance
the value of commercial bank deposits in Nigeria Financial performance is the extent to which
objectives of the firm and in this case financial
Review of Related Literature
objectives have been met (Yahaya & Lamidi, 2015).
Financial innovation is the improvement in the array
The company’s financial performance is subject to
of financial products and instruments that are
how effectively a firm uses its assets from its
stimulated by unexpected change in customer needs
principal role of conducting business and its
and preferences, tax policy, technology and
subsequent generation of revenues. Financial
regulatory impulses (Bhattacharyya & Nanda, 2000).
performance can also refer to the general well-being
Financial innovation is one of the most important
of a firm as far as finance is concerned over a certain
competitive weapons and generally seen as a firm’s
period of time. Financial performance focuses more
core value capability. It is considered as an effective
on items that affect the financial statements or reports
way to improve firm’s productivity due to the
of a firm directly. Financial performance analysis
resource constraint issues facing a firm (Ibekwe,
deals with items such as dividend growth, sales
2021). Banking system has been growing with
turnover, capital employed, amongst others (Omondi
technological developments and innovative
& Muturi, 2013).The financial performance of
productions. Developing technology and changing
different financial institutions can be measured by use
macroeconomic guidelines improved the Nigeria
of different ratios, measuring the performance against
financial system and many reforms have been set
the provided budget, benchmarking among other
about in the system. Over the last years, banks have
methods (Avkiran, 2011).The financial statements of
been trying to increase their portions of production,
commercial banks contain a variety of financial ratios
positively influencing profitability of credit cards,
designed to give an indication of the bank`s
telephone banking, and online banking as a result of
performance. Some of the ratios commonly used to
reduction in net interest incomes in Nigeria.
measure performance of banks include Capital
Historically, financial innovations have been
adequacy ratios, Asset Quality ratio, Earnings and
described as one of the bedrocks of our financial
Liquidity ratios. The most common financial ratios
system and the life blood of efficient and responsive
used to measure performance is the profitability
capital markets (Davis, 2017). The developments in
ratios. Profitability ratios measure the total
the financial sector have not only led to the increase
effectiveness of a bank’s management in generating
in the number of financial institutions, but also the
profits on interest income, assets, and owner’s
development in level of sophistication with new
investment. Firm performance can be calculated in
payment systems and asset alternatives to holding
various ways. These may include but not limited to;
money. This has resulted mainly from technological
increase in sales rate, market expansion, productivity
advancement and increase in competition as the
and profitability (Ichniowski & Giovanna, 2011).
number of institutions increase. Developments in
Sales growth rate is a ratio that measures the rate of
payment systems have started to create close
change in sales from time to time or a specified
substitutes for physical currency, thus affecting a core
period of time. The utilization of historical growth
part of banking in the area of physical collection and
rates is one of the methods of estimating future
payment of notes and coins. Simiyu, Ndiang'ui &
growth. Market share is the percentage of a market,

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which may be defined in terms of either units or other POS systems) and can be designed to connected
revenue, accounted for by a specific entity. Market to other POS systems as required, over the Internet as
share is a key indicator of market competitiveness, well as on local networks. The traditional POS
that is, how well a firm is doing against its (TPOS) is not easy to be moved, which means more
competitors. Firm’s financial performance is difficult to apply for movable merchants (Saravanan
measured in monetary terms. A firm financial & Arunkumar, 2019). A point-of-sale (POS) terminal
performance is reflected in the amount of success as is a computerized replacement for a cash register.
regards to its output in terms of; return on investment, Much more complex than the cash registers of even
return on assets, value added among others. Profit is just a few years ago, the POS system can include the
the main objective of commercial banks. Profitability ability to record and track customer orders, process
of firms is measured in various ratios which majorly credit and debit cards, connect to other systems in a
include; Return on Asset (ROA), Return on Equity network, and manage inventory. Generally, a POS
(ROE) and Net Interest Margin (NIM) (Murthy & terminal has as its core a personal computer, which is
Mouritsen, 2011). ROE is a financial ratio that refers provided with application-specific programs and I/O
to how much profit a company earned compared to devices for the particular environment in which it will
the total amount of shareholder equity invested or serve. A POS system for a restaurant, for example, is
found on the balance sheet. ROE is what the likely to have all menu items stored in a database that
shareholders look in return for their investment. ROA can be queried for information in a number of ways.
is a ratio of income to its total asset (Khrawish, 2011). POS terminals are used in most industries that have a
It measures the ability of the bank management to point of sale such as a service desk, including
generate income by utilizing company assets at their restaurants, lodging, entertainment, and
disposal. Therefore, bank performance can be museums.wikipidia.org (2017). Okuma, Nwoko &
measured by the level of profit, volume of Credit, Obialor (2019) in their study on causal relationship
number of clients and Value of deposit. This study between technologies of cashless policy and
adopted value of deposit because deposit translates to agricultural sector output in Nigeria found that POS
credit in the process of intermediation and the mere as a variable of cashless policy impacted significantly
number of client without deposit value is of no gain to on agricultural sector output.
the bank.
Mobility of Payment
Commercial Bank Deposit as a Measure of Mobile banking (m-banking) is an application of
Performance mobile commerce that enables customers to bank
The value of deposit mobilized by the commercial virtually at any convenient time and place (Suoranta,
banks in Nigeria is used as a measure of the 2003). It is the provision of banking and related
performance of Deposit money bank in Nigeria financial services such as savings, funds transfer, and
within the period of analysis. This is because deposits stock market transactions among others on mobile
determine the value and volume of credit given out as devices (Tiwari and Buse, 2007). In Africa, mobile
loan. While credit determine the profit generated by phones are the most widely used form of
the banking system. Commercial bank outputs communication technology (ITU, 2007). This has
(performances) are measured by the number of enabled the mobile market industry in Africa to be the
accounts or the number of transactions per account, fastest growing in the world when compared with
which includes deposits mobilized through such other continents. (ITU, 2007). The adoption of mobile
accounts. Other financial institutions, such as technology does not follow a single universal pattern.
stockbrokers, are also intermediaries between buyers It can be ascribed to differences in mobile
and sellers of shares, but it is the taking of deposits telecommunication infrastructure, types of services on
and the granting of loans that singles out a bank, offer, marketing strategies and the culture of the
though many offer other financial services. consumers (Harris et al., 2005).
Point-of-Sales (POS) Automated Teller Machine (ATM)
The Point of Sales (POS) system is usually a ATMs are the most commonly used bank innovation
computer device that is linked to a barcode scanner in recent times. Almost all the universal banks in
and printer device, where on the computer has been Nigeria have this facility available for their
installed special software for POS. For examples such customers. On most contemporary ATM, the clients
as transaction cashier or payment points in mini is identified after inserting a plastic ATM card with a
markets, super markets, hotels, restaurants, and much magnetic stripe or a plastic smart card with a chip,
more (Plomp, Rijn, van & Batenburg, 2020). POS that contains a unique card number and some security
systems can be made stand-alone (not connected to data, such as cessation date and personal

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identification number (PIN) (Joseph, 2019). Join METHODOLOGY
computer terminals accounting records and the cash Research design
vault in one unit, allowing clients to go into the The study adopted ex-post facto research design. This
bank’s record keeping system with a plastic card implies that the events that were being observed had
containing a personal identification number (PIN) or taken place already and the researchers had no control
by punching a special code number into the computer on the variables. This design was suitable for the
terminal linked to the bank’s computerized records 24 study since the events had already occurred and the
hours a day (Jude, 2019). Once entrance is attained, it data from it were duly documented in official records
grants a lot of retail banking services to clients. of well acclaimed institutions like the Central Bank of
ATMs are generally situated outside of the banks Nigeria.
halls, and could also be located at filling stations,
Nature and Sources of Data
airports mall, supermarkets and places far from the Data for the study were obtained from secondary
branches of a bank. They were established initially to sources notably from publications of the Central Bank
work as cash generating or dispensing devices. of Nigeria (CBN), Quarterly Statistical Bulletin,
However, because of advancement in technology between 2009 and 2020. The following data were
ATMs are capable of offering a variety of banking sourced: value of commercial bank deposit, values of
services, for example withdrawing cash, cash point of sales transactions, values of automated teller
transfers from one account to another and bill machine transactions, values of mobile payment
payments, checking account balances, making deposit transactions and web transactions in Nigeria.
and printing account statement. Banks use the ATM
as well as other innovative products to achieve Model Specification
competitive advantage, because it has the effect of In line with objectives of this study, the effect of
cost reduction and depicts an image of a strong bank financial innovation on the performance of deposit
(Lasisi, & Abubakar, 2020). money banks is represented in equations below. The
functional model indicates that the performance of
Web Internet Banking deposit money banks in Nigeria is a function of the
Banking involves the conduct of conventional explanatory variables of the study. This postulation
banking activities on the Internet, that is, the global was adapted from the models as used in previous
network of computer which does not depend on any studies such as in (Mbah & Obiezekwem (2019) who
"brick and mortar" office building; it offers financial studied the Electronic Banking and Performance of
services that are accessed through the Internet’s deposit money banks in Nigeria.
World Wide Web (W.W.W.). By reducing the
overhead expenses of traditional banks, Internet The functional model for this study is expressed as
banks in theory can offer clients better interest rates follows
on deposits than that of traditional banking average Model:
rate (Asidok, & Michael, 2018). Banks often rely on CBD = f (ATM, POS, WEP, MOP) ……….model 1
the Internet to convey information about financial
products to the general public, replace business Where:
conducted at the branch offices, which do away with CBD = value of commercial bank deposit
the need to put up new branches, and to serve clients ATM= Value of Automated Teller Machine
more efficiently. Internet banking sites present the transactions
prospect of more suitable means to manage customer POS = Value of Point of Sales transactions
finances, and such activities as paying bills on-line, MOP= Value of Mobil Pay transactions
searching for mortgage or auto loans, applying for WEP= Value of Web Pay transactions
credit cards. (Peter, & Emenike, 2020). f = Functional Notation
This study is anchored on the Location Innovation For estimation purpose, equation 1 is restated as
Theory of Desai & Low (1987), as innovations has CBD = β0+ β 1 ATM + β 2POS + β 3WEP + β
brought banking services to the doorsteps of clients 4MOP + µ ……………………………….equation 1
that are hitherto unbanked in Nigeria. Thus, the gap Where
between financial service providers, product and β0 = Autonomous or intercept
those that need these services and products is closed β1 = Coefficient of regression for POS
by innovation(s) and increased the ability of banks in β2 = Coefficient of regression for MOP
Nigeria to mobilize more deposits. β3 = Coefficient of regression for ATM
β3 = Coefficient of regression for WINT
µ = Stochastic variable or error term

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Method of Data Analysis such as normality test, stability test and serial
The study employed ordinary least square (OLS) correlation.
method of estimation to establish the effect of the The null hypothesis is that the variable is normally
independent variables on the dependent variable. The
distributed.
(OLS) is the most efficient method because of the
’’Best Linear Unbiased Estimator’’ (BLUE) Decision Rule
properties. The model equation will be estimated Decision rule is to reject when p. value is less than
using a variety of analytical tools, including the unit 0.05 level of significance
root test, co integration test and diagnostic Statistics
Results and Discussion
Table 1 Descriptive Statistics
DMB POS ATM MOP WEBT
Mean 1048123. 2141.215 93639.77 1216.861 4174.528
Median 982097.5 1425.000 75460.00 720.0000 2293.015
Maximum 1824707. 9430.100 205046.6 8085.620 20570.00
Minimum 581846.3 38.57000 18480.00 20.00000 880.0000
Std. Dev. 281539.1 1883.571 58400.07 1541.895 4217.690
Skewness 0.488661 1.906263 0.267015 2.632644 2.187051
Kurtosis 2.593787 6.850736 1.510003 11.07141 7.748351
Jarque-Bera 2.240337 58.72705 5.010555 185.7420 83.35921
Probability 0.326225 0.000000 0.081653 0.000000 0.000000
Sum 50309910 102778.3 4494709. 58409.33 200377.4
Sum Sq. Dev. 3.73E+12 1.67E+08 1.60E+11 1.12E+08 8.36E+08
Observations 48 48 48 48 48
Source: Computation using E-view version 9.0
The summary of the statistics shows that the average mean of performance of deposit money bank is about
104823. The average mean for point of sales is 2141.2, while averages mean of automated teller machine,
mobility of payment and web internet transfer rate were 93639.77, 1216.861 and 4174.528 respectively. The
standard deviations of performance of deposit money bank point of sales, automated teller machine, mobility of
payment, web internet are 2815391.1, 1883.571, 58400.07, 1541.895 and 4217.690. The values of the standard
deviations indicate that there is wide spread of financial innovation in Nigeria. This is also evident in the wide
gap between the maximum and minimum values. For example, the maximum value of performance of deposit
money is 1824707 while the minimum is 581846.3, with difference of 124. Similarly, the maximum of point of
sales is 9430.100 while the minimum is 38.57000. These performance variations are rather at the high side. Even
in the case of automated teller machine is 205046.6 and the minimum is 18480.00.It is equally observed that
mobility of varied widely over time. MOP For instance, is 8085.620 while its minimum value is 20.000. The
wide variation over time indicates high level of fluctuation of financial Innovation which affects real gross
domestic product in Nigeria.
Unit Root Test
The first stage of co-integration and Error Correction Model is to test for unit root. The whole analysis then
proceeds from it. It becomes necessary to analyze whether the series are stationary or not whenever time series
data are involved. The presence of unit root implies that the time series under investigation is non-stationary, the
absence of a unit roots shows thatstochastic process is stationary. The Augmented Dickey-Fuller (ADF) test is
employed in this test.
Table 2 Unit Root Test
variable ADF Integration Significant
PDMB -12.01882 1(1) 1%
POS -8.550198 1(1) 1%
ATM -47.674567 1(1) 1%
MOP -6.006397 1(1) 1%
WEBT -7.486602 1(1) 1%
Source: Author’s computation using E-view 9.1

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Finally, the ADF test was conducted on financial innovation on the performance of deposit money banks and the
results presented in table 2 show that null hypothesis of unit roots was rejected after differencing once. Hence, the
variable is clearly integrated of order one and at 1% level ofsignificant respectively.
Co-Integration test
Given that all the variables are integrated of order one, co-integration test was carried out to establish whether the
variable though individually non-stationary could be co-integratedas a group and also to establish the existence of
a long-run relationship among them. The Johansen procedure is used to achieve this. Both trace statistic and
maximum eigenvalue test are used to determine the number of co-integrating vectors. The test statistic rejects the
null hypothesis in favour of three co-integrating relationship at 5% significant level. But the maximum eigenvalue
test indicates also two co-integrating relation at the 5% level. The long run coefficients emanating from the co-
integration relationship normalization on the economy is presentedin the table below.
Table 3. Johansen Co-integration Test
Unrestricted Cointegration Rank Test (Trace)
Hypothesized No. of CE(s) Eigenvalue Trace Statistic Critical Value 0.05 Prob.**
None * 0.549983 65.95597 60.06141 0.0146
At most 1 * 0.273656 30.02485 40.17493 0.3531
At most 2 * 0.168192 15.63691 24.27596 0.4064
At most 3 0.138532 7.350008 12.32090 0.2916
At most 4 * 0.014116 0.639750 4.129906 0.4843
Trace test indicates 1 cointegrating eqn(s) at the 0.05 level
*denotes rejection of the hypothesis at the 0.05 level
**Mackinnon-Haug-Michelis (1999) p-values
Unrestricted Cointegration Rank Test (Maximum Eigenvalue)
None * 0.549983 35.93111 30.43961 0.0093
At most 1 * 0.273656 14.38795 24.15921 0.5647
At most 2 * 0.168192 8.286900 17.79730 0.6744
At most 3 0.138532 6.710257 11.22480 0.2758
At most 4 * 0.014116 0.639750 4.129906 0.4843
Max-eigenvalue test indicates 1 cointegrating eqn(s) at the 0.05 level
*denotes rejection of the hypothesis at the 0.05 level
**Mackinnon-Haug-Michelis (1999) p-values
Source: Author’s Compilation Using E-views 9 Output
The result of Johansen co-integration test is shown in table above. The result shows that there exist one (1) co-
integrating equations at 5% level of significance. This is because the trace statistic is greater than critical values at
5%. This shows that there exists a long run relationship between government spending and all the explanatory
variables. The result indicates that in the long run, the dependent variables can be efficiently anticipated using the
specified independent variables and, thus, we proceeded to estimate the Error Correction Model (ECM) so as to
reconcile the short-run dynamics with long-rundisequilibrium of the variables. The Error Correction Model results
are presented in table below.
Regression Result
Table 4. Error Correction Model Result
Variable Coefficient Std.error T-test Prob
C 0.117895 0.281231 42.23917 0.0000
LPOS 0.029339 0.022410 1.309183 0.1978
LATM 0.169120 0.026789 6.313153 0.0000
LMOP 0.120201 0.015421 7.794819 0.0000
LWEBT 0.061789 0.018899 3.269525 0.0022
ECM(-1) -0.210541 0.150773 -1.396408 0.1701
R-Squared: 0.879036; Adjusted R-squared: 0.864284;
F-statistic: 59.58867; Prob(F-statistic): 0.000000;
Durbin-Watson Stat: 1.949070
Source: Author’s Compilation Using E-views 9 Output

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The results presented above will be analyzed using three criteria; economic a priori criteria, statistical criteria and
econometric criteria.
The R2 which is the coefficient of determination or the measure of goodness of fit shows the degree of variation in
the dependent variables. The closer R2 is to 100%, the better the fit of the model. From the regression result, R2 is
0.87%. This implies that the independent variable can explain about 87% of the variations in the dependent
variable, leaving the remaining 23% which would be accounted for by other variables outside the model as
captured by the error term. The adjusted R2 is 86% meaning that even with an adjustment in the dependent
variables,they can still explain about 86% of the change in the dependent variable. The F-statistics measures the
overall significance of the explanatory parameter. From the result in table 4 above, our computed value F-statistics
is 59.58867 while the probability is 0.0000, since the probability of the F-statistics in the computed output is less
than the desired 0.05 level of significance, we accept and state that there is a significant relationship between the
variance of the estimate and that of the dependent variable.
The specific objectives are addressed using the coefficient of regression and its corresponding t-statistics were use
to test the hypothesis of the study. The result is as shown on the equation below:
PDMB = 0.117895+0.029339POS+0.169120ATM+0, 120201MOP-0.0617897WEBT
Effect of point of sale and performance of deposit money banks (PDMB),
The coefficient of regression (0.029339POS) indicates that point of sales (POS) has positive effect on deposit
money banks. This indicates that a unit increase in point of sales will lead to about 2percent increase in the
deposit money banks. The t-statistics 1.309183 with P.value of 0.1978 Since the P.value is greater than 0.05
level, we reject the alternative hypothesis and accept null hypotheses which indicates that “point of sales has no
significant effect on deposit money banks”. Therefore that study posited that point of sales has not significantly
improved the performance of deposit money banks in Nigeria.
Effect of Payment Mobility and Performance Deposit Money Banks (PDMB),
The coefficient of regression (0.120201MOP) indicates that Payment Mobility (MOP) has positive effect on the
performance of deposit money bank (PDMB),. This indicates that a unit increase in Payment Mobility will lead
to about 1.2percent raise in the performance of deposit money banks (PDMB),. The t-statistics 7.794819 with P.
value of 0.0000. Since the P. value is less than 0.05 level, we reject the null hypothesis that “Payment Mobility
does not have significant effect on Performance Deposit Money Banks”. Therefore the study maintains that
Payment Mobility has significant effect on the performance of deposit money banks.
Effect of Automated Teller Machine (ATM) and deposit money banks (PDMB),
The coefficient of regression for Automated Teller Machine (ATM) is 0.169120ATM. This indicated that credit
to Automated Teller Machine has positive impact on deposit money banks. This implies that an increase in ATM
will lead to about a 16 percent increase in performance of deposit money banks. However, the t-statistics
(6.313158) has a P. value of 0.6860. Since the P. value is less than 0.05, the study rejects the null hypothesis that
“Automated Teller Machine has no significant effect on the performance of deposit money banks” and accept
alternative hypotheses which indicates that ATM has significant effect on performance of deposit money banks
in Nigeria.
Effect of Web Internet (WINT) and Performance Deposit Money Banks (PDMB),
Web internet has positive effect given its value as 0.0617897WEBT, this implies that increase in web internet
increased the performance of deposit money banks, however, the t-statistics which measured the individual
significant of the variable shows that web internet is 3.269525 and its probability as (0.0121) implies its
significant effect on performance of deposit money bank. This led us to acceptance of alternative hypothesis
which maintain that web internet has significant effect on the performance of deposit money banks.
Normality Test
The normality test adopted is the Jargue – Bera (JB) test of normality. The JB test of normality is an asymptotic
or large sample, and if is based on the OLS residuals. This test computes the skewness and kurtosis measures of
the OLS residuals and it follows the chi square distribution.
Hypothesis
Ho: B1= 0 (The error term follows a normal distribution).
Hi: B1≠ 0 (The error term does not follow a normal distribution).
The normality test follows chi-square distribution with two degree of freedom (df) at 5% level of significance.

@ IJTSRD | Unique Paper ID – IJTSRD52040 | Volume – 6 | Issue – 6 | September-October 2022 Page 1248
 International Journal of Trend in Scientific Research and Development @ www.ijtsrd.com eISSN: 2456-6470
Figure 1.
8
Series: Residuals
7 Sample 2009Q2 2020Q4
Observations 47
6
Mean 5.67e-16
5 Median 0.005246
Maximum 0.283377
4 Minimum -0.170854
Std. Dev. 0.093020
3 Skewness 0.192977
Kurtosis 3.537791
2
Jarque-Bera 0.858102
1 Probability 0.651127

0
-0.1 0.0 0.1 0.2 0.3

It can be seen that the reported probabilities are greater than at 5% significance level and therefore, the null
hypothesis is accepted. This means that the residuals are normally distributed.
Stability Test Therefore, the test is carried out using the cumulative
The stability test enables us to predict the dependent sum and cumulative sum of squares. The result shows
variables in a regression with a reasonable level of that our model is dynamically stable because the
precision given the independent variables used in the fitted lines fall within the dotted lines for critical
analysis. value of 5%.
Stability Test Breusch-Godfrey Serial Correlation Lm Test
This serial correlation test was used to check for the
serial relationship between the variables. The null
hypothesis stated absence of serial correlation but the
alternative hypothesis states the presence of serial
correlation. The prob.chi square if less than 5% level
of significance signifies the acceptance of the
alternative and rejection of null hypothesis while the
prob chi square greater than 5% level of significance
signifies the acceptance of the null hypothesis and
rejection of the alternative hypothesis.
Table 5. Serial Correlation Test Table
Breusch-Godfrey Serial Correlation LM Test:
F-statistic 0.138059 Prob. F(2,39) 0.8715
Obs*R- Prob. Chi-
Fig 2 0.330419 0.8477
squared Square(2)
Sources: Authors Computation from E-view 10
The results above showed the prob. (chi-square)
having a value of 0.8, which is greater than the 5%
level of significance therefore we accepted the null
hypothesis which stated that there is no serial
correlation.
Conclusion
It was discovered that financial innovation is
inevitable in improving the performance of deposit
money banks. Drawing an inference from the finding,
it is glaring that financial innovation helps in
increasing profitability and return on assets of deposit
money banks and subsequently strengthens the
Fig 3 economy. A growing body of empirical analysis

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 International Journal of Trend in Scientific Research and Development @ www.ijtsrd.com eISSN: 2456-6470
including product analysis, firm level studies and International Journal of Information
industry level studies demonstrate strong positive link Management, 2, 2, 47-65.
between the functioning of the financial innovations [5] Asidok, N. O. & Michael, A. A. (2018). Mobile
and in the long run, deposit money banks. banking transactions and bank profitability in
In the light of the above, the researcher concludes that Nigeria: International Journal of Economics,
this study is needed at this time as its finding have Commerce and Management United Kingdom
revealed a lot of insightful information necessary for 6(6) 5-9
serious consideration to Nigerian government and [6] Avkiran, N. K. 2011. Developing an instrument
banking sector who would consider this work a to measure customer service quality in branch
companion for economic growth. banking. International Journal of Banks
Recommendations Marketing. 12(6):10 -18.
This study therefore recommends as follows: [7] Bhattacharyya, S. and Nanda, V. K. (2000).
1. Increase in the number of outlets offering point of Customer circumspection, exchanging costs
sale (POS) devices to support their economic and financial advancement. Review of
activities. The number currently in circulation is Financial Studies, 13, 1101-1127.
limited and banks should deploy more POS [8] Davis, F. D. Bagozzi, R. P. Warshaw, P. R.
devices to strategic places like shops, churches, (1989). User acceptance of computer
schools, hospitals, institutions and fuel stations technology: A comparison of two theoretical
for easy access to financial transactions. models. Management Science, 35 (8), 982-
2. Aggressive spread of Automated teller machines 1003.
especially in the unbanked rural areas to ensure
their financial access is guaranteed. [9] European Commercial Bank (ECB, 2003),
3. Technological aspect of mobile banking should be Financial innovation and monetary policy.
encouraged to ensure awareness is created to www.http:ecb.http.org. retrieve June 2020
enlist more users. [10] Goh, S. C., Elliott, C., & Quon, T. (2011). The
4. iv. The regulatory authorities should commit relationship between learning capability and
more funds in the area of public awareness, Organizational performance: Meta-analytic
enlightenments and sensitizations in order to examination. The Learning Or-ganization,
increase the use of e-payment channels. 19(2), 92-108
5. v. The government should put in place proper [11] Gorton, G., & Metrick, A. (2010). Securitized
monetary and fiscal policies in order to promote banking and the run on repo. Yale school of
financial innovations in Nigeria as the management, Working Paper
investigations in this study have proved to
[12] Harris, P., Rettie, R. and Kwan, C. C. (2005)
engender performance of deposit money banks in
Adoption and usage of m-commerce: A Cross-
Nigeria.
Cultural comparison of Hong Kong and the
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